Men or women: Who's the better entrepreneur?

[Murphy3]

Men or women: Who's the better entrepreneur?


Philipp Harper

We think we know who's better at basketball — at least for now — and we think we know who's better at relating to people.

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But how about business? Is the prototypical entrepreneur male or female?

This is one of those questions that defies a quick and clear answer. But, sift through all the statistics, weigh the anecdotal evidence, and you can't help but come to the conclusion that... Well, keep reading.


Starting from the same place

There's seems to be little difference in what motivates men and women to become entrepreneurs.

This is true not just in the United States but in the world over, says Robert D. Hisrich, a professor of entrepreneurship at Case Western Reserve University in Cleveland. He refers to a broad-based study that looked at entrepreneurial motivation by gender.

The top three reasons cited by men:

Independence
The chance to make lots of money
Enthusiasm for the idea behind the business


And for women:

Independence
Enthusiasm for the idea behind the business
The chance to make lots of money

Get past this near-perfect congruity in motivation, however, and gender-based differences begin to emerge.


Women on an entrepreneurial tear

When it comes to the pace of new-business creation, the nod goes to women, who for the last decade and longer have taken advantage of an increasingly level playing field to make up for lost time. Consider:


According to a 2001 report by the Small Business Administration's Office of Advocacy, the number of women-owned businesses increased by 16%, and their revenue by 33%, between 1992 and 1997. Comparable figures for all businesses were 6% and 24%.
From 1990 to 1998, women created 1.5 million sole proprietorships, outpacing their male counterparts by 25%, according to another Office of Advocacy study released in 2003.

But if they've come a long way, women still have a long way to go before they achieve small-business parity. A breakdown of the sole proprietorship category shows that in key areas, the gender gap remains sizable.

Though sole proprietorships are favored disproportionately by women as a vehicle for business formation — accounting for nearly 85% of women-owned businesses, compared with 73% of all businesses — and despite the accelerated pace of business creation by women, men continue to dominate several key measures.

In 1998, women owned nearly 37% of America's 22.6 million sole proprietorships, but their businesses generated just 16% of revenues and 19% of net income. Clearly, it would seem that men put more cash on the bottom line.

But why?


Doing what they like to do

Part of the gender disparity in earning power has to do with the kinds of businesses women choose to create.

A full 70% of the income earned by female-owned sole proprietorships between 1990 and 1998 were in the services sector. The two most popular business categories? Day care and door-to-door sales.

Jerry Osteryoung, who as director of Florida State University's Jim Moran Institute for Global Entrepreneurship has mentored more than 3,000 business owners, says women are for more likely than men to choose "lifestyle businesses." These are enterprises based on personal interests and passions.

These also are enterprises that play to women's strengths.

Case Western's Hisrich says an ability to empathize with people both inside and outside their companies makes women, on average, better managers (and marketers) than men. It also may be why they gravitate to the services, which often require personal interaction with clients.

Men, on the other hand, tend to be fulfilled by rapid growth — both of the company and its bottom line — and aren't so concerned with what it is that's growing rapidly. Capital-intensive industries offer the best chance for this kind of growth, Hisrich says, and also provide a venue in which men can flex their relative strength in finance and operations.


And the winner is...

As for which sex is better able to stay successfully in business, well, there doesn't appear to be a clear answer.

A 2000 Bureau of the Census study on the factors contributing to small-business success found that gender was not a contributor. What did appear to be important were such variables as level of startup funding, number of employees, and age and education of the business owner, to name a few.

Still, a few interesting observations can be made.

Osteryoung says when he has encountered women running fast-growth businesses — in the $1 million to $5 million annual sales range — they manage every bit as effectively as men; but he concedes that very few such companies are headed by women. He thinks a woman's sense of responsibility for her family may be the chief delimiting factor in this, but perhaps some other mechanism is at work as well.

For his part, Hisrich says, "Instinct tells me that women have a better business success rate than men."

He says men are at greater risk for failure because their egos drive them to aggressively pursue growth, while preventing them from seeking help when they need it. Apparently the male reluctance to ask highway directions extends to business as well.

Says Osteryoung: "Women build better supporting staffs and ask all kinds of people for help. Guys tend to shoot from the hip."

It would seem, then, that the best entrepreneur would be neither female nor male but a hybrid combining the best attributes of both sexes. This hypothetical entrepreneur would:


Manage with a woman's empathy but be able to muster a man's aloofness to keep from being drawn too deeply into employees' lives.
Possess the female flair for marketing and client relations and the male knack for finance and operations.
Be willing to dramatically advance the business by "going deep," but only after much thought had been given and all the necessary consultations undertaken.

We'll wait for genetic engineers to produce such a creature. In the meantime, let's call this particular battle of the sexes a draw.

[Nash13]

Women may be having better small businesses, but if you look at the Fortune 500 list, men dominate by a large margin.

[u2sarajevo]

Originally posted by: Nash13
Women may be having better small businesses, but if you look at the Fortune 500 list, men dominate by a large margin.

That is due in large part because of the backward thinking of the persons that have always been in charge of the Fortune 500 companies. The glass ceiling is not a myth. Where I work, we have a Womens Initiative which promotes Women in leadership roles. Until the IBM's of the world come around, the sex barrier in the Corporate world will not be breached.

And that is just as pathetic as the racial issues in the workplace and out of the workplace.

[veruca salt]

U2, the budding young feminist

[LRB]

Well women did found the oldest entrepreneurial profession in the world. [img]i/expressions/face-icon-small-wink.gif[/img]

[madape]

Of course men are better. That's a dumb question.

[Murphy3]

madape, i'm with you.

the polls used in this article are inherently flawed

[madape]

No kidding. The numbers this piece of propaganda throws out ignores, among other things, of the size of the business. I don't think a housewife who decides to earn a little extra cash babysitting while her husband is at work should count as much as a guy who quits his job and morgages his house to raise capital to start a computer software firm.

[southern_sweets]

I make more money than most of the male posters at D-M.com. [img]i/expressions/moon.gif[/img]

[Murphy3]

good for you sweets. we're proud of you

most of the 'men' at d-m.com are pretty damn close to college age or are currently in college. so maybe not quite the accomplishment that one might think

[mary]

I'm sure most anyone can name more successful male entrepreneurs than successful female entrepreneurs. And you can choose to conclude that means men are simply "better" at it than women, but I'd have to disagree. Its long been argued that women are more risk averse than men. If thats something you'd concede to, then you would expect to find women taking on more slower-growth ventures. In fact, its been shown that in asset markets, women tend to wieght their portfolios more heavily with low-risk securities than their male counterparts, which obviously leads to lower returns. For whatever reason (wheter it be biological or cultural), women and men are just wired differently when it comes to making choices. I also have to believe that gender discrimination and the traditional "role" of females in our society are two contributing factors.

I poked around a bit to find some research on risk aversion. One paper concluded the following:

By Catherine C. Eckel Department of Economics Virginia Tech

Differences between women and men in attitudes toward risk are well documented across a variety of situations and environments. Studies have found women more likely to perceive a situation as risky. Women also exhibit greater risk aversion in their choice behavior and lower valuations of risky prospects. They are found to have less risky asset portfolios than men, and report a lower propensity to assume financial risk than men. Regardless of whether there is a significant sex difference in risk preferences, important consequences may arise if there is a perception of greater risk aversion on the part of women. If women are, rightly or wrongly, stereotyped as more risk averse, this can lead to statistical discrimination, which could adversely affect women in many aspects of their lives.

This paper addresses both the issue of sex differences in risk preferences and the question of whether a person's sex is read as a signal of risk preference. Subjects are presented with five gambles and asked to choose which of the five they wish to play. The gambles include one sure thing; the remaining four increase (linearly) in expected payoff and risk (measured by the standard deviation of expected payoff). Each subject also predicts which of the five gambles each of the other subjects would choose for herself. Three different choice environments are tested: gamble and investment frames with the possibility of losses, and a gamble frame with no losses. We find that women are significantly more risk averse than men in all three settings, and predictions of both women and men tend to confirm this difference.

edited to add source so as not to commit any copyright infringements [img]i/expressions/face-icon-small-happy.gif[/img]